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Market by market, square by square, the walls are beginning to come down. The miles of hulking blast walls, ugly but effective, were installed as a central feature of the surge of U.S. troops to stop neighbors from killing one another.

“They protected against car bombs and drive-by attacks,” said Adnan, 39, a vegetable seller in the once violent neighborhood of Dora, who argues that the walls now block the markets and the commerce that Baghdad needs to thrive. “Now it is safe.”

The slow dismantling of the concrete walls is the most visible sign of a fundamental change here in the Iraqi capital. The U.S. surge strategy, which increased the number of U.S. troops and contributed to stability here, is drawing to a close. And a transition is under way to the almost inevitable U.S. drawdown in 2009.

There are now more than 148,000 U.S. troops in Iraq, down from the peak of around 170,000 a year ago, and President Bush has accepted the military’s recommendation to remove an additional 8,000 by February.

Iraqis are already taking on many of the tasks that Americans once performed, raising great hopes that the country will progress on its own but also deep fears of failure.

On Oct. 1, the Sunni-dominated Awakening movement, widely credited with helping restore order to neighborhoods that were among the most deadly, passed from the U.S. to the Iraqi government payroll in Baghdad. There is deep mutual mistrust between the new employer and many of its new employees, many of whom are former insurgents.

Another element of the transition, which has attracted far less notice than the Awakening transfer, is the Iraqi army’s beginning to turn over neighborhoods to the paramilitary National Police. In the future, its officers, too, will leave and be replaced by regular police officers.

All three moves mark a transition to an era in which the Shiite-dominated Iraqi government seeks more control over its own military and sway over America’s.

“The Iraqi security forces are now able to protect Iraq,” said Joaidi Nahim Mahmoud Arif, a National Police sergeant in Dora, in southern Baghdad. “They will depend on themselves above all.”

In dozens of interviews across Baghdad, it is evident that while open hostilities have calmed, beneath the surface many Sunnis and Shiites continue to harbor deep mistrust.